* Testing the Lows - Stocks are once again moving lower, as we break below the closing lows of a couple of weeks ago. The advance-decline line for NYSE common stocks has broken to new lows, but the number of stocks registering fresh lows has remained below its level of two weeks ago. Specifically, we had 414 NYSE common stocks make fresh 52-week lows on Wednesday according to Decision Point; that compares to the earlier level of over 1400 new lows. I'm seeing some firmness in bonds also that hadn't been present a couple of weeks back. Should we see selling drying up with a number of sector non-confirmations of lows, I'll be tempted to nibble at the long side...the first time in a while for anything other than an intraday trade.
* Submerging Markets - Lots of chatter re: weakness in the emerging markets. A number of countries are requesting IMF aid (first Iceland and Hungary, then Pakistan, Ukraine, and Belarus); emerging market stocks (EEM) and debt are underperforming those of developed nations. As we look for signs of financial stabilization in the U.S., there are signs of considerable instability overseas. Looking for short-term stock market bottoms aside, I continue to operate on the assumption that these are not economic problems that will resolve over a period of days or weeks.
* What's Weak - Consumer discretionary stocks (XLY) continue to underperform consumer staples issues (XLP) and resource-related stocks (XLB, XLE) continue to underperform the broad stock market. These recessionary themes are worth watching; I strongly suspect they need to reverse to sustain any market upturn.
* Integrity and Its Absence - It's come to my attention that yet another website is lifting content from blogs (including this one) wholesale, posting to their site, and using whatever traffic they can generate for advertising revenue. If you're reading this post on a site other than TraderFeed (or Seeking Alpha, which has permission to selectively repost some material), you're on a site that engages in copyright theft for their own financial gain. My modest request is that you not patronize such sites; I find their ethics disgusting and hope their bots do steal this particular posting. :-)
* Trading Symmetrical Triangles - Trader Mike finds the market down, but not out.
* More Good Reading - Ethanol woes, looking behind high yield ETFs, and more views from Abnormal Returns. Recession, credit problems, and market decline haven't run their course and a host of other worthwhile perspectives from Charles Kirk. I continue to post major themes and market indicators daily via Twitter.
* Looking in the Mirror - Great post from SMB on asking the tough questions and reviewing your trading.
* When Volatility Contracts - Nice market study from Quantifiable Edges finds something interesting: reduced volatility is not always bearish.
* Getting Ready for Halloween - Financial Ninja shows scary Fed charts that have gotten scarier.
* Moral of the Story - When the financial crisis first really starting hitting markets hard, I looked and looked again at the implications of financial rescue for inflation and the U.S. dollar. I looked into buying gold as one way of playing the theme; I looked at ways of expressing dollar weakness versus other currencies. Each time I looked, the obvious trades looked horrible to me; they expressed *such* a consensus idea. Small investors were hoarding gold coins and bloggers were screaming about the terrible inflationary consequences of bailouts. Well, maybe these trades will eventually pan out, but I would have gotten smoked by following my gut. Joe Granville used to say, "If it's obvious, it's obviously wrong." Gold is way off its highs and the U.S. dollar continues to rally higher, especially versus euro; deflation and flights to safety are the operative themes for now. It really pays to know what other people are thinking, especially when they're thinking similarly and will have to bail out of ideas that don't come to fruition.